The crypto space has been greatly anticipating the launch of physical Bitcoin futures on Bakkt. However, the original launch date of Dec. 12, 2018, was scrubbed due to a lack of regulatory approval from the Commodities Futures Trading Commission (CFTC).
This may have contributed to Bitcoin’s price meltdown from $6,500 to $3,100 since the physical Bitcoin futures on Bakkt were expected to lead to a Bitcoin rally. Speculators who priced in a Bakkt rally may have dumped en masse when the original launch date was canceled. Bakkt now projects that futures will launch on Jan. 24 2019, but it appears this launch date will be delayed even further.
Bakkt apparently needs an exemption from the CFTC to custodian its own Bitcoins. The CFTC usually requires that custodianship is operated by a third party bank, trust company, or futures commission merchant.
Even if the CFTC votes in favor of this exemption, a 30 day comment period is required. Christmas is coming up, so the CFTC will not be able to vote until Dec. 26 at the earliest. The CFTC would then have to read the public comments after the 30 day comment period. This would mean that, even under ideal conditions, the approval date for this exemption will be at least several days after the Jan. 24 projected launch date.
That said, conditions are less than ideal due to the partial shutdown of the United States government. President Trump has refused to sign a bill that will keep the government funded since Trump is trying to force Congress to pay for a $5 billion wall between the United States and Mexico.
Democrats, it is time to come together and put the SAFETY of the AMERICAN PEOPLE before POLITICS. Border security must become a #1 priority! pic.twitter.com/Wck6UpQGil
— Donald J. Trump (@realDonaldTrump) December 20, 2018
One-quarter of the Federal Government has been shut down since 12:01 am Saturday. Roughly 380,000 workers have been sent home, and 420,000 are working without pay until the new budget is passed. The CFTC is among the organizations that lost their funding until the government shutdown is resolved. The CFTC will maintain a small workforce of 61 employees during the shutdown for critical monitoring and enforcement actions, but the rulemaking part of the CFTC, the branch that Bakkt is depending on, will be out of business until the government shutdown ends.
The House has passed a bill that will end the government shutdown by including $5.7 billion of funding for the wall. However, the Senate will not go back into session until Dec. 27 and is not expected to pass the bill since 60 votes are required, and the vote will likely go down party lines.
There is speculation that there will be no resolution until after Democrats take control of the House on Jan. 3. If this comes to pass, it would push back the approval of Bakkt’s CFTC exemption until at least February.
The reason the crypto space has been so excited to see the launch of Bakkt Bitcoin futures is they will be the first official physical Bitcoin futures. Currently, futures markets for Bitcoin exist on the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBoE), but these are cash-settled and do not increase Bitcoin’s spot demand or price. In fact, the cash-settled Bitcoin futures in Chicago are likely a primary reason that Bitcoin has fallen from $20,000 to $4,000 during 2018, due to immense short selling pressure and the diversion of investment away from spot markets.
The physical Bitcoin futures on Bakkt will directly increase Bitcoin’s spot demand and price since they are backed by actual Bitcoins. Further, the futures will settle each day, which will make them a mechanism for investors to buy actual Bitcoins on major stock trading platforms.
The Bakkt physical Bitcoin futures will be operated by the Intercontinental Exchange (ICE), the same organization that runs the New York Stock Exchange (NYSE), making it likely that these physical Bitcoin futures will be widely available and popular.
Whether the Bakkt physical Bitcoin futures can overcome the price suppression caused by CME cash-settled Bitcoin futures remains to be seen, but they should at least cause some increase in Bitcoin spot demand and price. However, the crypto market will have to wait until the CFTC gives the green light to get excited about Bakkt, and for now, there is no set date for when CFTC approval will occur.